You might have heard about our multi-million dollar real estate deals & their success stories of how the passive investors who invested in these deals became millionaires. But, there’s a lot that goes into making any deal a success. And for the first time ever, I’m going to share the “Behind the scenes” of one such success story – SOL Apartments in San Antonio, TX.
This was the most creative apartment deal that we have done so far. We bought an Apartment and land beside it to solve a parking problem that existed for the past 60 years. We combined both to create one plate of land. We learned about the entitlement process in this deal Two different sellers closed on the same day.
Story of the Deal
- Found using Broker Relationship – Listed website
- We have Boston Woods Apartments Nearby
- This Deal had been in and out of contract 4 times
> The issue was parking was a 1:1 parking ratio
> The last contract was $5.5m for the Apartments.
> Seller was frustrated
- Fully exterior rehab completed and interior ongoing.
Has been 80% occupied from 2012-2017
How did we solve the Parking Problem?
- Did suggest looking at vacant lands beside the Apartment
- But didn’t want to do anything with it or the deal.
- Did mention that previous buyers were able to contact the land owners.
- North Side vacant Land owner asked for $1m
- The previous under-contract buyer negotiated to 500K
- The Previous buyer pulled the plug last minute due to the risk of converting vacant land to improved land with parking.
The only way to make the deal work was to buy one of the Vacant lands and build some parking lots. but How do we Mitigate the Risk of the City not Approving The Vacant Land conversion to a parking lot?
How did we mitigate the Risk?
Before Going under contract
- Spoke to the City officer about the feasibility of Converting the North Side vacant Land to a Parking lot
- Found out the Parking Ratio requirement.
- Talked to the City Administrator to ensure all align.
- The city was supportive and gave verbal “OK”
- Gone through the city code of development.
Hired a Civil engineer
- Walked with the Engineer
- Meeting- Civil Engineer/City to get verbal “OK”
- Understood the process of conversion
Parking Lot contractors
Vacant Land Conversion Challenges?
- Boundary Survey – for platting the vacant land.
- Once the land was platted, then it was merged with the apartment.
- New Large Plat was recorded.
Improvement Survey –Parking lot expansion.
- To determine driveway, # spots, Building corner, etc.
Tree Survey – Determine the type of Trees & Size
- To get approval from City to cut the trees.
ALTA Survey – for the Bank that shows
- A new survey for the Bank.
All needed to be approved by the City.
Since we positioned this as an “Improvement” and not New Development.
- There was no new code Parking ratio requirement.
- We were able to fit 35 parking spots. (1.3 ratio).
We decided to add
- Playground for residents
- Dog Park – WIP
- A Nice Park area for residents
Resolved Parking Issue
- Brought in much higher paying Demography
- Household with two cars or more.
- No more concern about limited parking.
- Brought up occupancy from 80% to 90% easily.
- We started charging for covered parking.
- The only apartment complex with a park in the submarket.
- Families with children — Playground and Park.
We recently sold SOL Apartments for a total passive investors return of 2.55x equity multiple within 4.5 years. That is 34% per annum cash on cash return for our passive investors. That means, that if you invest $100K you would have received $255K after 4 years.
A few more passive investors millionaires were created.
The Morale of the Story
- Value add may not be increasing rent or reducing the expense
- Creative methods and Risk-taking can bring in huge value